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Us 21, Bowles 6, Washington 5, Boehner 5, Chris Van Hollen 4, Jay Carney 4, Simpson 4, Nancy Pelosi 3, Ronald Reagan 3, Portman 3, Obama 3, Greece 3, Virginia 3, United States 2, The United States 2, Crs 2, Tim Geithner 2, Kumbayaa 2, People Between 2, Dick Lugar 2,
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  CSPAN    Capitol Hill Hearings    News/Business.  

    November 14, 2012
    1:00 - 6:00am EST  

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the discussion of the so-called fiscal cliff. chris van hollen doors is a deficit package modeled after the simpson-bowles plan. >> thank you. it is great to have you here. we have had people for the last 24 hours giving their opinions on the fiscal cliff and the fiscal cliff negotiations and what should happen. we are expecting you now to tell us exactly what is happening. >> listen, i think we all need to accomplish two things as we approach the fiscal cliff. one, do everything we can to avoid it both in terms of the sequester peace and also the tax peace. then create a structure where we can deal with the big issues, the big fiscal challenges over the next six to nine months.
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it will be very useful if we can least agree to a framework structure. one is to make sure we can accelerate in what has been a slow recovery. at the same time, act now to put our long term deficit on a sustainable downward path. act now on both. by now i mean first avoid the fiscal cliff, and then get into the next six-nine months in a structured way. >> several people have pointed out the democrats have the advantage in the fiscal cliff. is there any possibility you would go over in order to force action if necessary? >> there is no desire to go over the fiscal clef. >> is there a possibility what? >> there is a risk we would go over the fiscal cliff. two parts, as you now -- one is the sequester piece. i believe there is a very decent chance we can resolve that piece.
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because there is universal agreement there is a bad idea to have these across the board, indiscriminate cuts. look at the amount of deficit savings over a year, you talk about $110 billion, $55 billion defense, $55 billion in non- defense. it seems to come up with an alternative way to achieve that in the budget window. that is one piece. the tax piece gets tougher. we also have the objective of beginning to reduce the deficit in a balanced way. i happen to support the framework of simpson-bowles in terms of their revenues and cut and the ratio of revenues to cuts. if you look at the simpson- bowles framework, their starting point presumes the amount of revenue you would achieve if you allowed the top rate to go back to 39%, the clinton era levels.
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that is in their base line. then they raise revenue on top of that. as we approach this challenge, which is the long-term deficit reduction plan, my view is we should make sure we get that kind of mix of both cuts and revenue. i'm open to look at all different ways of getting there, but it's hard to achieve that result if you box yourself in. >> what you have heard over the last few days from republicans is a willingness to that tax rates for high income people rise, but to do it with deductions. i saw you quoted in some paper i cannot remember the name of right now this morning saying he won both. you have a republican movement on the tax issue, but do you really have to get both deductions for high-income people and rates for high-income people?
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>> what we need ultimately is a mix of revenues and cut the you see in simpson-bowles. we should look at tax reform. the issue is how you do tax reform in a way that eliminates preferences and other things that we could prune out of the tax code, but also accomplishes the other objective in simpson- bowles, to achieve deficit reduction in a balanced way. if someone has another idea of how to achieve the total amount of revenue in simpson-bowles that they presume, i think they have a great framework, but if you look at the deficit targets they hit, which we thought was a good aggressive target, $1 trillion over 10 years, if you look at the debt to gdp ratio and a look at where they got the deficit on an annual basis relative to gdp, in getting their they assume this additional revenue we are talking about. it seems to me we should get our heads together and figure out how we get the revenue that is projected to come in through simpson-bowles, the whole plan, as well as the cuts.
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>> let's stick with the tax piece, even though that is your peace. the budget committee does not get to do taxes, even though you will have a piece in the negotiations. in your view, is there a way to get the $1 trillion of deficit reduction that you need from revenues and still bring down tax rates? >> and still pay to bring down tax rates? that is the question. i am saying, let's do the math. look, i thought the tone of speaker boehner's remarks was very good.
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i also want to see what the substance was. what i do know is that different people heard this remark and interpret it in very different ways. grover norquist said he thought it was a good statement by speaker boehner, and other people who think we need to generate additional revenues to have a deficit reduction plan also say he made a good statement. it would be good to know exactly what he is talking about. >> how about for you? the whole premise of tax cuts, as we talked about the last 24 hours, is to eliminate deductions and bring down rates. that is what happened in 1986. >> i am talking about, what is our starting point in terms of the rates? what are we negotiating from? are we negotiating down from 35% or from 39%? i want to emphasize this point -- simpson-bowles, go look at it. they assume the amount of revenue that you would achieve if you allow the tax rate to go up.
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their tax reform plan is built off an assumption that you will get the amount of revenue as if he started at 39% and went down. they begin with what they call the plausible baseline, which presumed this decoupling. my view is that if we want to take simpson-bowles as our framework, which i think we should in terms of the revenue and cats, budget cuts, we should follow their guidance. >> and i have not heard any comments from republican suggesting they are not willing to go where you are talking about. >> than republicans should come up with a alternative way of achieving the revenue component of simpson-bowles. i can tell you what they are talking about mathematically right now does not get you there. i would not want to take any actions that shut the door on getting the revenue parts of simpson-bowles.
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because they lay it out very clearly. they got revenue and they have cut. >> let's talk about the spending side. someone on the stage earlier this morning talk about $1 trillion in tax cuts, $1 trillion in discretionary spending, $1 trillion in entitlement cuts. we have not got any texture around that. how you get $1 trillion -- what are you willing to do to medicare that will have lasting savings over a 10-year period? and one not turn out like the provider cuts -- the last for a year and everybody, they do not work. >> i am open to all ideas in this area. let me just say -- we need to move medicare away from a fee for service system, and we have begun to do that. and since no incentives for anybody in the system to contain costs.
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it does not create incentives for the patient to contain costs and is not create incentives for the providers to contain costs. we are putting in the building blocks to get there. i think we can make significant savings in the area of what is called dual eligibles, people on medicare and medicaid, a relatively small percentage of the overall population but a very high percentage of the cost. there are a lot of misalignments between medicare and medicaid payments. you can do things like look at redesigning medigap policies. some of the increased incentives
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for people to spend more on medicare. these ideas have been discussed to contain costs. when i think we should avoid, at least in the first instance, is not trying to contain health- care costs but simply transferring those costs on to other individuals. our first focus should be on containing overall health-care costs, which consume about 18% of our gdp and will rise rapidly. >> one way to get away from fee- for-service is to move toward a premium support plan -- how much money you get, go out there and shop in the marketplace and buy what you can. >> what we know is that the nonpartisan congressional budget office looked at that and their conclusion was it does not contain costs. >> is not fixable? >> not according to the congressional budget office. they concluded that if you simply provide a voucher to go out into the health-care system, as you know, in the private health care system costs have been rising at at least the same rate as in the medicare system.
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in fact, medicaid obviously has serious problems. medicaid costs are much lower rate -- medicare has risen as by the lower rates on a per-capita basis. the private health insurance markets -- simply transferring somebody out of medicare into the private health insurance market will save medicare money but it will save medicare money by requiring premiums to go up dramatically on these individuals whose median income is $23,000 right now. >> that hopefully will get some of you -- you have a number of health insurance company executives who may be able to weigh in on that. a couple things that have been suggested -- raising the retirement age, does not make any sense today to have the retirement age be the same or slightly higher than it was seven decades ago. >> social security, number one thing, we should create process like with ronald reagan.
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i think we should look at early retirement age and social security, which is currently 62, and look at ways to great incentives for people to work longer. create incentives for people to work longer. the retirement -- that has the joint beneficial effect of reducing social security costs, but also keeping people working longer, providing for their families and generating more income for the economy and for the treasury. i think there are other things you can do, but look, i am open to a conversation about this. when it comes to things like social security, again, you have got to take a mixed approach. look at simpson-bowles or others, they have a combination of revenue and spending reform.
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>> you are willing to at least look at that? >> i am willing to consider them as part of a possible plan, but i do not think we should jump to solutions, especially in medicare, that's simply transfer cost. in social security there are other ideas, some of which we discussed in the super committee. >> social security has to be a part of this? >> i think we should look at social security as -- that is what simpson-bowles did. they said, look at social security, but not as part of our deficit reduction target. there is room for a conversation there -- what others have said is they do not want that to be part of how you calculate your deficit.
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>> what do you have to do? you talk about a process that lasted over six months, maybe a little longer. what do you have to do in the next few weeks to give people the confidence and this congress the credibility it needs? >> two things. with respect to the sequester, you have to come up with at least an alternative mechanism do generate $110 billion in deficit savings. so you do not do this across the board meat ax approach. put together a proposal that combines getting rid of direct payments, some of the bigger agriculture subsidies, a proposal would eliminate some of the tax breaks for oil companies. >> why not just do that? >> you have to talk to our republican colleagues about what you just cannot do that. we did not even get that to a vote. my point is, there are a number of ways you can achieve $110 billion.
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and prevent the sequestered. that is only for one year. then you have to do a agreement on the tax piece and create a very clear structure and timeline we get the so-called grand bargain done over a six- nine month period of time. you'll have to do some expedited procedures. a lot of thought on how you create a situation that forces action. the sequester here, for all its problems -- it is hopefully going to result in at an action- forcing event. there are risks, but also potential benefits. >> what does the president need to do to get this deal done?
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there have been stories in the last 40 hours to talk about how he is going after the people to take his case, little thought is what the election was about. is that helpful to the process, or is there more of an inside game he needs to play to keep what happened a year ago from happening again? >> i think it is both. it is clearly he has to reach out to congressional leaders in both parties. he has already reached out -- i am sure they will build on that. continuing the conversation with the public is important. you had some conversation here about interpreting election results. one of the things not talked about in this election -- what we will do with respect to resolving tax policy issues, at least some of them, was discussed in virtually every debate, something that was front and center.
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>> is that a mandate? >> i think the public has spoken on that, but that does not mean the president is not willing to reach out for the people. i do not think he is going to say, on all these issues, a whole range of different issues, there is a mandate. there are certain issues like immigration reform where clearly they were at the center of the campaign. the president is on very firm ground saying we have heard from people on this. that does not mean he is going to -- he is not willing to listen. he is. >> in the house, your leadership -- nancy pelosi stepping down? >> i do not know. >> you do not know? >> i do not want to speculate. my guess is we will find out fairly soon. i think she has done -- my view is she has done a good job. was very willing, as you probably read in books written about this, to support a budget agreement that must come out of
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the discussions between speaker boehner and the president. >> if she does step down, would you be interested in the job? >> i am not getting ahead in anything. if i was betting, i bet she is going to stay. >> you bet she would stay? >> this is all speculation. >> last question before i open it up -- a lot of people have comments or questions for you. we also have a couple people who will be at the white house tomorrow. a group of ceo's meeting with the president. what can this group do to be constructive, to help get this discussion where it needs to go? what should they do and what should they not do? >> is an important initiative -- i just heard the ad on my way over here. the message is beginning to get out on the airwaves.
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i think it is really important to keep the dual focus, meaning, i guess we need to come up with a credible long-term deficit reduction plan, but let's not do anything that compromises our efforts to accelerate the economic recovery. for example, i have proposed extending for at least one year the payroll tax cut. or its equivalent. you could structure in a different way. the congressional budget office came out a few weeks ago with analysis that showed overwhelmingly in terms of its impact on jobs and the economy that the one-year extension of the apparel tax cut gives you much more jobs and economic bank for your buck than keeping the top rate at 35%. it is not even close. you are putting more money into the pockets of 160 million working americans were stretched right now.
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they will go out and spend that money and goods and services in their community. it has a much bigger multiplier effect. i do wonder about some of these arguments that you have got to keep the rate at 35% because of the fragile economy and jobs. not, at least so far, silence the opposition to extending the payroll -- it does a lot more for the economy. >> part of the argument is small businesses. >> i have also seen -- we can go through all the stories. they talked about the hamilton projects -- people who have looked at these defects for a long time and relatively small changes in the top marginal tax rate, according to the studies, and according to the crs, are not the driving factor in these economic --
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>> the payroll tax would be much more powerful? >> no doubt that right now with a soft economy that has a bigger economic boost. >> we have a couple of questions. >> the first, the simplest and this powerful idea i heard during the failed 2011 grand bargain was to raise the eligibility age about 65. should this be on the table? >> it should be part of the conversation. one very practical complicating point on this, that goes to the supreme court decision on the affordable care act. one of the wrinkles, more than a recall, one of the provisions decided was that people on medicaid, the initialed people who came into the affordable care act and medicaid did not have to be covered by states to chose to opt out.
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frankly, that creates a problem because the affordable care act would have otherwise provided day potentially feasible option for people between 65 and 67 who are not knocked out. now you have people at relatively low in comes at the age of 60 -- even if you took the retirement age up. at 66 years old, somebody busting their back as a construction worker retires -- where will they get their health insurance if they are between 65 and 67 and cannot go on the exchange? having to live in a state that says they will not participate because -- medicaid, nine governors have said. these are practical concerns. >> do your legal experts say there is some way to fix that?
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>> you would have to find a way. you could do it legislatively, but you'd have to have agreement to do it. these are sort of practical issues that we need to deal with as part of that. the affordable care act did change the discussion with respect to the medicare age, but then you have this pretty sizable potential hole. >> one more -- these are ceo's, they are used to giving performance reviews. why do all of you not talk to each other and discover what each of you means by the statements you are making? actively pursue a solution and not just debate this -- would you agree that is not at this time -- is important at this time to do a right rather than determine who is right. >> we are excluding this forum from that comment. look -- there is no doubt we are not going to get there if we are not talking to each other. i just saw rob portman. i am not betraying any confidence is to say he and i already exchanged a conversation. we served together on the so- called super committee.
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my view is that those conversations are very important. they began -- at the end of the day, those conversations will be important in forming the negotiations that ultimately take place between the leadership in the house and, of course, in the senate and the white house. i think every member can contribute to that conversation and they should be having direct conversations. i have already reached out to some of our republican colleagues to do exactly that. put more ideas on the table. >> we started with a group of senators and ex centers who all opined it was the ability of people from good will of both parties to come to gather and do what you and senator portman did has gotten worse than it has ever been. do you agree with that? you have been in congress for a long time. >> i was elected in 2002. no doubt that -- it was not as if it was all kumbayaa at that time either.
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but it has gotten worse. not so much in terms of the personal relationships. i think there are still very strong personal relationships. it has gotten worse in the ability to compromise. i would say people should read the book -- you know these gentlemen well. one is from the american enterprise institute, the other from the brookings institute, they wrote a book called "worse than you thought." it is hard. when you get into this discussion, everybody says, there we go again. just read the book. these are two scholars of the congress who have always been suspected -- respected as people who call the shots. look at the indiana republican senate race. dick lugar is a conservative republican with a high conservative rating.
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i have great respect for him. he was beaten by somebody who ran too far from his right -- to his right, who said his definition of compromise is when democrats agree with republicans. if compromise is a dirty word, we are in a big world of hurt. to follow other conversation, in addition to fixing the debt, i would encourage everybody to do what you do every day in your jobs, which is try to reach a fair principled compromise. it has got to go beyond common ground. we use the word common ground a lot. look at the last election, there is not a lot of common ground in terms of overlap in approach. it has to be compromise, which means accepting some things you do not like on both sides and getting some things you do like as part of meeting in the middle. that is compromise. common ground -- we can work through the budget. certainly there are some areas
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of overlap, but it does not begin to get you to the kind of deficit reduction numbers we need to get to. you can only do that through compromise. i want to circle back to the jobs piece. you can only do that with compromise. it has been an interesting conversation on sequestration. the first time i saw some ads run about how cuts in defense would lead to all these job losses, 100,000 jobs lost in the state of virginia. what happened to the argument that cutting spending right away was the way to prosperity, which we heard from our colleagues for 67 months? why is it that building a tank creates jobs by building new roads and bridges and transit does not? of course it does. we need to dispense with this idea that just cutting somehow leads to prosperity.
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it does not. but we do need to cut in a measured, stable, credible way, during a period of time, to get deficit down. we need to focus on mandatory spending areas coupled with revenues. that is why simpson-bowles as a framework provides the right direction. >> other questions? >> obama rejected simpson- bowles. why are you considering it? >> this is both a strength and a weakness for simpson-bowles. simpson-bowles provides great architecture. it does not flesh out every detail. nobody has taken simpson-bowles and converted that from a well thought out blueprint into legislation because there are lots of various ambiguities. the overall architecture of simpson-bowles says we should achieve deficit reduction through combination of cuts and revenue.
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it seems to me we could take that as the starting point. that is how we had deficit numbers. my view is we take the ratios, simpson-bowles, and move forward. if we disagree, we have an obligation to come up with something else. the president's budget is actually much more closely aligned with the framework of simpson-bowles than the other budget we have seen coming out of the house, for example. partly by virtue of the fact he has revenue in addition to cats. the president's budget has some significant cuts in mandatory spending programs, whether in the agricultural area, also some in the health-care area.
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if you look at his aggregate number of mandatory health spending, it is not far from simpson-bowles. so i think that that is the right framework. i think if you look at comparative plans, the president is closer to it. as you know, house republicans rejected it wholesale, the simpson-bowles plan. >> final question? >> from an overall comment, it is frustrating. we have heard a couple panels where it is almost like national geographic. we get to watch another organization, how it works, everybody talks to each other but nothing gets done. i wonder -- in a company you basically get to call a meeting, lots of people disagree. we had to cut and grow at the same time. who is the single person who can get everybody in a room to get
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them to move things to the next level? i was at a bunch of conferences this summer and last summer. simpson-bowles came up and we're still talking about the exact things that nobody has taken any action. who is the single person who can get everyone in the room and say this is the next step we need to take? >> you are right. is a messy process. the democratic process is a messy process. i have worked with law firms and lots of clients who could not make a decision and said, we will implement this now. there is no one person in our system, especially in a divided government, who can do that. the president is going to take a lead. and the president is calling members of congress to the white house, but the other question is who can get them all to agree? agreement in our system requires a willingness to compromise, and requires an ability to get the votes, ultimately, in both houses of congress.
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in order to get the votes, you need to be able to persuade members of your caucus. i think that, look, the fiscal cliff creates risks, but it also creates opportunities. the only other system that would allow you to both have an election and implement your ideas would be to move to a parliamentary system where the prime minister's party by definition has the majority and can implement something. we have a system that is very different. the checks and balances often need a lot more checks in the system, but -- i know you are frustrated. i understand people are frustrated. all i ask people to do is to study the facts and come up with what they think is a reasonable compromise.
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it is easy -- everybody has their own perception of what to compromise. that is why it is nice to get an outside view. you have simpson-bowles. you have two groups of bipartisans who put together a model. they have a lot more revenue, frankly, than simpson-bowles. everybody should know -- simpson-bowles also cut defense more than anyone is willing to talk about. this across-the-board sequester is a bad idea, whether it's defense spending or other areas, but if we are going to talk about these seriously, we have got to really delve into the ideas bipartisan groups have put out there. >> chris van hollen, thank you very much. >> thank you. >> this fall, and meningitis
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outbreak was traced to contaminated steroid injections in massachusetts. tomorrow, the house energy committee looks into the outbreak. bringing its eli starting at 10:00 a.m. eastern on c-span3 and c-span radio -- it to you live starting at 10:00 a.m. eastern on c-span3 and despair radio. >> watch book tv online ive tomorrow, streaming video from the national book awards in new york city and red carpet interviews with finalists. all online, live tomorrow at 6:00 p.m. eastern. add your comments on facebook.com/booktv. >> secretary geithner spent
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tuesday at the annual wall street journal ceo council meeting. this is a half hour. >> ladies and gentlemen, the treasury secretary of the united states, tim geithner. [applause] the people in this room, we polled them before you got there, by two to one we do not expect a deal before we hit the fiscal cliff. there is a bit of a highlighting of the dominican republic, which we have not figured out. [laughter] i think there is a lot of anxiety in this room about the fiscal cliff. do you think we will go over it, or are you confident they will deal with the other side before we get there?
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>> there is a lot to sea, but i think there is every reason to believe this is a solvable problem. it is true we have a lot of challenges with the country. but there is a lot of support for trying to do things that will help make the economy stronger in the short term. universal support for extending the middle-class tax cuts -- that remove much of the greatest risk of the fiscal cliff. there's a lot of support for finding bipartisan consensus on other things that would make the economy stronger, like a set of amendments -- commitments to finance higher levels of infrastructure and education. there is bipartisan support for that. there is bipartisan support for doing the obvious things -- you
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have to pass an extension of the business expenditures, things that are important to do. there is a lot of support for trying to make some real progress on long-term fiscal challenges. a lot of benefit in doing that for the economy. i think this is a solvable problem and we want to do as much as we can to take advantage of this opportunity to make some progress on each of those fronts. >> one thing about which there does not appear to be agreement -- that is, should the bush tax cuts on over $250,000 be extended, or should they be raised? i heard jay carney say there is no way the president will agree to anything that extends the tax cuts on the upper two brackets. that sounds like a line in the sand. is it? >> it is important to start by acknowledging that we find this encouraging that you have seen republican leaders in the last couple days explicitly embrace the recognition and support for as part of the balance of fiscal reforms a package that raises revenues.
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that is very important. that is very encouraging. reckoning the basic reality of how you govern a country like this in the face of the challenges we face. that is good. you know the president's position -- very simple. let's expand middle-class tax cuts, removing the potential greatest source of uncertainty and damage from the fiscal cliff. let's put in place a balanced set of a fist or forms that recognize the reality republicans now embrace that the most fortunate to% of americans are going to a pay a modest but larger share of income taxes. but he is not prepared to extend the upper income tax cuts. if you look at these questions carefully and thoughtfully, we have, as many people have done, look at the amount of deficit reduction you have to put in place. if you recognize what is a realistic share revenues will have to contribute to that and believe that we should not be asking middle-class americans to
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pay more in taxes, i do not see how you do this without higher rates. i do not think there is any realistic way to do it. it is not possible to raise money from upper-income people by closing loopholes, getting rid of deductions, stuff like that? >> what we propose is as part of the balanced reform package, a package that would raise roughly another $1.5 trillion in revenues. 1% of gdp. to do that with a mix of modest rate increases, back to the clinton rates, which was a very good economy for the american business sector and private investment. to combine this with reforms that limit the value of deductions for upper-income americans. other ways to do that, but there is a lot of magical thinking
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about how much money you can raise some tax expenditures. a lot of people who have looked at that question and concluded that, incorrectly, there is a huge amount of resources there you can realistically race. that is not true. when people look at this and look at it carefully, they will come to the just reached. to do enough to restore fiscal sustainability, be careful what you do to long-term growth prospects of the country, and make sure we are not adding to the burden on middle-class americans. a mix of rates and deductions -- i think that is what that critical consensus ultimately well be on this. >> are you saying that if republicans do not agree to raise the top rates to what they were when bill clinton left office, we are going over the fiscal cliff? >> i do not see a realistic way to solve this without a recognition -- let's see the positive side.
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it is encouraging to see the leadership recognize that we are going to have to generate a modest amount of additional revenues from high income -- that is a good recognition. we are just at the beginning. we will get people -- we will see how it goes. i agree, this is going to be tough. i know the lack of clarity and resolution is going to be a burden and a source of uncertainty. this is something we will have to go through. we will govern this country better, find a better way to support things that improve the long-term growth prospects, we have to find a way to resolve the divide on this question about the long-term. that is worth trying to do. >> as you said and the president said, we have to both raise taxes and restrain spending.
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the proposal so far on medicare has been largely limited to the provider side. is the president going to leave here with a proposal to do something different on medicare in order to get the republicans to back off their position on the top rates? >> the president is putting in his budget -- not enough attention has been given to this -- hundreds of billions of dollars of carefully designed reforms to the health care system that are designed to reduce costs. we recognize better ways to do that, but there are hundreds of billions of bars in detail, specified reforms in that context -- hundreds of billions of dollars in detailed, specified reforms. he has proposed hundreds of billions of dollars in other savings in what is called the other parts of the government, and other mandatory, things like that. people can design things
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differently. he is prepared to look at those things. we will start with where we have been, with pretty well designed reforms. >> if all the president says is i have put out my budget, i have won the election, take-it-or- leave-it -- >> that is not the way he said. he was careful in the language he said on friday. we will look at what we have proposed. they are very substantial. one point of comparison, they are larger in the 10-year window than the health care savings proposed by simpson-bowles. take a careful look at those. we will take a careful look, to. >> what happens if we go over the if? if republicans cannot bring themselves to raise the top rates and accept what you are offering? >> i do not see why they would make that choice. why would you want to put the economy through that? the recognition that revenues
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will have to go up, after conceding their recognition revenues will have to go up on the most fortunate americans, why would you decide to take the economy over the if and put the economy through -- through the cliff and did the damage that would cost? because you are unwilling to agree to a modest set of rates for 2% of americans. it seems deeply implausible as a strategy and should be avoidable. >> why aren't you willing to say in order to avoid the economy going over the cliff we are willing to entertain a different way to get money out of the top 2%?
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>> when you take a hard look at the amount of resources you can raise from that top 2% of americans through limiting deductions, you will find yourself disappointed. we're looking for 1% of gdp. you are going to find it is hard to do that through deductions unless you want to raise taxes quite meaningful on middle-class americans. there are people who might argue that is a good policy. that is not the president's view. even if you think it is good policy, do you think it is more realistic? is it more politically realistic to get a deal that will involve tough things on all aspects of government, where instead of a modest tax increase limited to 2% of americans, a much broader tax increase. is that more politically feasible? in any framework that restores the score responsibility you will be asking pretty significant sacrifices of a broad swath of americans.
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everything that happens on the spending side effects people much more broadly in this context. what is proposed is an agreement of a ratio of roughly $2.50 of spending cuts for every $1 in revenue. those spending cuts will cut significantly into basic functions of government. government transfers that affect millions of americans. that is why -- that recognition why we think the shape of balance is going to have to involve that mix of rates and reforms. >> i feel i'm watching the same play with the same actors at watched last year. john boehner still in the house. you are still at the treasury. the president is back in the office.
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harry reid is in the senate with more seats -- why should i believe this will end any more positively than the summer of 2011? >> i will not try to talk to about optimism, but let's look at what has changed. you have republican leadership acknowledging relief for the first time in this debate in public that they would agree to increase revenues as part of an agreement to help restore fiscal balance. that is a very important change. you could debate what has motivated that change, and of course it is true that that approach has very popular substantial support among the american people. you have a much greater recognition that the economy would benefit from a carefully designed balanced agreement on fiscal reform. putting that off indefinitely is not good for the country. that is important, too. i think, again, if you listen carefully to what people are saying and what many politicians are saying, there is a lot of consensus on the things that would be good for the economy now. extend the no class tax cuts. that is98% of americans with tax certainty. agreed to fund a carefully designed program of larger public investment and infrastructure.
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that is very good for growth. make sure we're doing sensible things in education, educating future americans. things with broad bipartisan support. they will provide the basic anchor for a agreement. >> if we go over the cliff, at some point when the congress to raise the debt ceiling. the president's leverage is until the end of the year -- if they fail to get a deal and that the taxes go up and the president will go on tv and say i tried, the republicans were obstinate, but the leverage shifts to them because you need the debt ceiling and the president has said that not raising it is impossible? >> i do not think so. anybody who looks at the experience of the costs to the
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country of those republicans employed last year will find that is not something it wants to repeat. you do not put the credit of the united states at risk, however. you cannot threatened to default on the credit, destroy the credit of the country as part of some game to get marginal advantage on policy questions. that has never been a responsible way to govern, judged by any predecessors, republican or democrat. my view is the people were part of that and are still there. they will do what congress only can do, pass the debt ceiling with less drama. it was not just drama -- it was enormously costly and damaging. >> what is your role in this next act? will you stick around until we get a deal? >> i will play a valuable, important role until around the inauguration. >> let me ask you a couple questions. then you'll get to questions from the audience.
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how would you evaluate the state of play in europe now? >> i think what the europeans have done over the last several months is very important. they are in a much better position to more carefully manage the incredible difficulty of the reforms they still have for their countries. it changes the way europe is governed and run on financial policies. even with the most compelling amount of political will and -- this will be very difficult. reforms will take some time. what they have done over the last several months is give them a framework that makes that possible. they still have a lot of tough decisions had. what i'm referring to is the combination of firewalls the government has agreed to and what the central bank is pushing. >> over the next few months, there is a question about whether spain will need a
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bailout and whether germany will approve. if they do not, all the ecb offers are useless. you told us you thought catastrophe diminish to the part where they were manageable. they seem to be rising again. >> this will be true for years. you will see a lot of uncertainty about the concourse of each of these additional steps. in greece over time and any other country that gets itself in a position where it is difficult to borrow sustainable rates. by credibly committing leaders of europe to take out the risk of catastrophic failure from the equation from the markets, they bought themselves some space to do that without there being much damage on the rest of the world. they have to demonstrate they are willing to do those things.
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they are attending a much better position to do. even with the events of the last few weeks. i cannot think it is surprising that greece is still hard. the greek government has done enormously difficult things over these last few weeks and i think those reforms will be rewarded by more support from the europeans. you will see a little uncertainty about other aspects. >> what does europe need to do in the next two or three months? texting have to demonstrate -- >> they have to demonstrate they are moving to put reforms in place. and a better mix of constraints. those are the key things they have to make progress on. that will take it difficult amount of political negotiations over the next several years.
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>> china. with the new leadership -- what will you be watching for? >> the big question is what will be the shape of this next- generation of economic reforms in china. they have had a remarkable record over the last 30 years of broadening the scope for property rights and private enterprise, managing a remarkable increase in incomes brought this but growth across an economy. but they have a difficult set of challenges ahead as the population -- as the population ages. they have run out of room to use those tax forms of stimulus to get the economy moving in the short term. you will look carefully to what they do to expand the scope for private investment, private initiative, better property rates not just for us but chinese innovators to expand opportunities. people are going to look to the
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chinese government to see what is the new direction going for it. all indications we have are that the people that will be at the center of the government going forward are committed to that path. not debating that basic trajectory. but there will have to make some decisions about the shape of those reforms. even as recently as last spring, despite the fact they were in the midst of a political transition, they were setting new frontiers of financial reforms. they have some more work to do on that side but that is part of the commitment towards a more market oriented economy. >> what about their attitude toward their relationship with us? it is clear what kind of relationship they want with us? >> i think they recognize how
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important it is for them to have a stable expanding global economy and how important it is to them to still enjoy access to the major markets. it is because of the recognition that they have been willing to move on a range of things that are very hard for us an important to our commercial interests. i think that is the balance will hold going forward. the democrats keep citing clinton era rates. where the only relevant for income-tax rates but not for spending levels or as a rate of gdp? i will sign up for clinton era income-tax rates it obama commits to clinton era spending levels. >> you cannot repeal of the aging of the population. million americans become eligible for medicare and social security in the coming years. it is not something you can ignore.
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part of governing is recognizing those basic realities. the level of spending projected in the president's budget is one example. the modest spending outside of its adamant rhetoric -- relative to the share of gdp. in the president's budget, the level of spending for non- defense discretionary spending, those levels are very low. the share of the economy relative to clinton. we think we have laid out a sensible balance in this context which shows significant restraint where you need to show it.
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but still recognizes that we cannot ignore the fact that we have millions of americans retiring. >> why should we believe an administration that has ballooned the deficit attacked it with any vigor? >> the people who say that miss some basic realities of what drives our deficit. it is to the deficits have gone up. it has gone up for reasons you all know. let's just review them -- they go up significantly because of the cost of the bush tax cuts and expansions we inherited. go up significantly because of
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the cost of the crisis and recession. the policies be put in place which have helped bring economic growth back are only 10% added to the increase in deficit over this amount of time. people are mistaken in their basic app tradition. -- attribution. >> i hear about a continued concern that this administration is simply somewhere between does not get business and is tossed out to it. people complain about regulation -- and is hostile to it. people complain about regulation. you have heard the laundry list. what do you see to american ceos when they complain to you about that? >> i say tell me what policy you are concerned about and let's talk about the merits of them. if there is a proposal in the financial system you think is too costly are missed designed, some of what that is. what would you replace it with and how would you do it? if you look on balance at what is set up policies be pursued and what the fed pursued over the last three and a half years have been, they have been dramatically effective in not just putting out the financial buyers got laying out the
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foundation for economic growth. the rate of growth in the assessment and productivity over this time has been a very good set of policies for the american private sector relative to -- if you look at in the country's experience in financial crises, i think we at basic test. -- we meet that basic test. if you are concerned about the shape of reform on the regulatory side, it is true financial reforms are tougher. you want to leave this economy vulnerable to a crisis like we had in 2008?
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the things we haven't done have been good to the long-term - we have done have been good to the long term health of the american financial system. >> anyone else have a question they want to pose? yes? >> how much more debt are >> how much more debt are you willing for the american people to bear to continue to stimulate the economy? >> our deficits are not about the above 5% of gdp. they are down dramatically from where the heat -- are now down about 7.5% of gdp. there are down dramatically from where it started. you need to get the deficit down to the point where the debt stops rising as a share of the economy. to do that, you have to be slightly below 3% of gdp. that basic objective and there's everything we propose on the budget and at the same basic objective that anchors the proposals before us today. it is a basic recognition.
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how much is enough? that means you have to go down to below 3%. to go from 7.5% to 3% -- spending stuff is automatic in a recession starts to recede but you still have to find consensus on a set of reforms. that is what this debate about the fiscal framework is going to be about. how to come to consensus on roughly 2% of gdp in additional savings. roughly 1% on the revenue side and the balance on the spending side. you do not want to do that quickly. if you try to do that too quickly, you will really hurt and economy that is still not growing as rapidly as he would like. given the pressures around the
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world in europe and elsewhere, you want to keep your focus on doing things to help make it stronger in the short term. that means you have to have a gradual path. >> this will be the last question. >> it seems one of the themes which inhabited the first four years was the balance between economic priorities and other priorities. how much political capital energy was spent on health care and other things. the question is, how do you strike that balance and you see
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that balance changing at the go forward into the next four years? >> let me complicate your question by saying about the balance between short-term and the immediate and long-term things that matter for the strength of the economy. it is important to recognize that as we get to this next stage of this fiscal reform debate, you have to think about this not just about how you bring this deficit down gradually to the point where there sustainable. you have to think about this and the terms of what can you do to improve the long-term growth perspective of the american economy. there are a set of things we have to do in and for structure and education just to name two. that are very important to the growth potential of this country and not very expensive. if we sacrifice those objectives in the interest of getting more fiscal restraint more quickly, we will do a lot of damage. i would encourage people to look at -- we want to look at things that are good for growth now and growth over the long
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run. that is why you do things that mattered to the near-term strength of the economy as a whole. but the president said our principal objective of the economic side will have to be what is good for the growth prospect of the american economy and how to design a balanced set of reforms to restore fiscal stability. i know there are people out there who say it's november 13. the end of the year approaches. why don't you just put off all the stuff to buy yourself some time? why not extend everything got to mark i would discourage you from doing that as an -- as an attractive alternative to review leave all the uncertainty -- alternative. you leave all the uncertainty. what incentive have you given
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anybody to negotiate? if you say again we are going to extend and i -- and delay, what gives people the confidence? they always believe if they hold out, they can just extend again. i know that cliff is unattractive. it would cost a lot of damage to the american economy. that damage is avoidable. but be careful about those who argue for and urge for last -- let's just extent. it will leave a different source of uncertainty which is what will give the people the incentive to come back and do something tough? thank you. [applause] >> on tomorrow morning's washington journal, a focus on the so-called fiscal cliff, expanding tax breaks -- extending tax breaks.
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our guests include nancy cook, kevin brady of texas and rep sander levin. you can call in with your questions to steve latourette, a member of the appropriations committee. rep raul grijalva and jason dick. live at 7:00 a.m. eastern. at going senate budget committee chairman kent conrad sent a final deficit reduction plan would total about $5 trillion. >> red carpet interviews with nonfiction finalists.
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all online live tomorrow at 6:00 p.m. eastern. add your comments about the evening. >>he said building in medicare eligibility age in changing the formula for social security benefits could be part of the final deal. his remarks and the wall street journal's annual ceo council meeting are about 25 minutes. >> if there has been -- one of the most constructive conversation that has taken place in congress in the last couple of years has been a group of senators called the gang of six. we invited all six but due to various scheduling conflicts, we got one. senator kent conrad. they are negotiating in the back room.
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i would also point out senator kent conrad has been budget committee chairman and is retiring at the end of this year. senator, great to have you here. thank you very much. >> why don't we go back to the questions that take up on the first question that david asked? to set the context for this and get the mood of the business community. the you believe there will be some form of constructive best of it -- that does it deal -- do you believe there will be some form of constructive deficit deal? let's go to the second question. if there is a deal, how are your investment plans likely to be affected? a quick vote on this. everybody have a chance to vote?
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1, 2, or 3. okay. wait just a minute longer. while we are waiting, senator conrad was not only a member of the gang of six but a member of the gang of eight, every gang tried to contend with -- we should look at your tats. probably have every effort to put some sort of remark from the deficit deal. because he is retiring, we are expecting that to be -- he will tell us the secret of what is happening in the senate's right now. do we have results? 77 percent said it will increase investment jerry 22% say the same. 0 say it would decrease. a tremendous pent-up demand for some sort of resolution. let's go to the third question. are you optimistic or not
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optimistic about your business prospects over the next year? 1 is optimistic, 2 is not optimistic. senator, all we talked on the phone. you are optimistic there will be a resolution of this. i wonder if you could give us your sense of what would that look like? what constituent parts, what sort of revenue increases and what form? i'm speaking for myself. not as part of any of the group's i have been part of, whether it is bulls simpson or group of six or group of eight. at the end of the day here, we will be in the range of a $5 trillion pacas. i hope we are. i think we are going to have -- we will look back on what has already been done and factor that in.
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what has been done so far has been on the discretionary spending side of the equation which is less than 20% of the overall budget. so it is critically important we move to entitlements, reforming entitlements, and the revenue side of the equation. there will be additional domestic discretionary savings. there will be additional entitlements other than the main entitlements, that is social security and medicare. social security i think will be handled separately. if one of the part of the deficit reduction bill. any savings will be part of extending the solvency of social security itself. >> that is done howard? by reaching the age limit? >> it will be done in several different ways. extend the cap in terms of what income is exposed for funding social security. the age will be extended over an extended period of time.
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you also change the so-called bin points, a technical way of determining what social security payouts are. he will also be an inflation adjustment. the of this adjustment is done in a way that most economists say is not fully accurate-- the inflation adjustment is done in a way that most economists say is not fully accurate. >> the people in this room, they qualify for social security? >> sure. >> so there should not be a means test? >> that goes to the question of ben points. my former father in law is a very successful man.
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he told me many times i do not want social security. i do not want to take it. if you do not want to, you don't have to. >> there are a lot of taxes paid for -- why shouldn't social security be any differently? >> it is designed as a social insurance program. if you pay premiums for social insurance, you ought to qualify for the benefit. i think much easier to justify means testing is medicare. i've voted as a member of the finance committee in number of years ago. a group of us passed in the finance committee means testing of medicare. >> i did not understand the
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justification there for working class families to pay a part of the medicare benefits for very well-to-do individuals. that is a very different model than the model for social security. >> at the end of the day, once -- all this is done on the medicare fund, what is the resolution likely to look like? >> the most likely resolution is something that is done to slow the growth to the growth that occurs in the underlying economy. if we can accomplish that by a series of measures, i think we would have done ourselves and the country world of good. slow the growth of spending to
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the growth of the economy. >> how do you do that? >> there are a series of steps that can be taken. more co-pays. going back to providers and asking them to take less of an increase. raising the age of eligibility which is more attractive now that we will have exchanges in place.
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meaning people who are not in medicare will have an alternative place to get coverage. >> are these elements likely to be part of a final deal? what happens to the defense budget ? >> i think it will be asked to take additional savings. it would not be asked to take the amount in the sequester. defenses are taken savings approaching $500 billion over 10 years. that is in the budget control act. the sequester would ask defense to take another roughly $535 billion of savings. it is done in a way that makes almost no sense. there is the prioritizing. i do not think any serious person has looked the approach and said that makes any sense at all. my own anticipation is that number will be reduced but there will still be a request for additional defense savings probably in the range of $200
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billion. >> and that gets achieved? cuts at that level? >> well, if there is going to be an overhaul deal here, a deal that has anti the reform, revenue, additional discretionary savings, it is all going to have to move as package. that is my best judgment at the moment. >> talk to us about process. the fiscal cliff is a few weeks
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away. are there extensions? how does the process work now? what do we get come december 31 and when do we begin to approach a resolution of the sort you just described? >> here is what i have been trying to sell. number one, a down payment. in the range of $400 billion. on the revenue side and on the spending side. those are things that would be done now that one could be a short are actually going to happen. because they would be passed now. a framework that sets out how much money they are to save and raise and what the balance is between the two.
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those committees of jurisdiction began -- then be given six months to work out the details, to provide specifics. third, if they fail for whatever reason, there be a fail-safe. that fail-safe actually goes into effect if congress if we does not produce the savings and revenue agreed to in the framework. >> sounds like a sequester. >> different than the sequestered. the sequester was designed to say this is not something anybody would want to do. this approach would stand back on its head. instead of having something that was widely seen as making no sense in being unacceptable, they have it fail-safe that you could live with. my well live with if committees in jurisdiction to not reach
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that which is called for. it would have to be part of the package. said the that is offered, hopefully by leadership, by the white house. and what have all these elements. >> we are counting on the market to beat everybody into line. if this is not done in a responsible, rational way, markets will step in. secretary geithner just talked about putting the dollar at risk. put in the credit rating of the u.s. at risk. is there really a compelling argument within congress? when there is a crisis abroad, it is the first place people move into. the reserve currency around the world. is that hovering over these negotiations or that anxious about the markets? >> i think it is hovering over this. there is a more immediate prod, the reality that will confront every member of congress. these tax cuts from the bush era are all going to expire.
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the sequester, $1.20 trillion across-the-board cuts. that is in law. the doctors who treat medicare patients are going to face a 28% cut. these are not somebody's imaginings. these things are all in law. they are going to happen. there is a debt limit the session -- that will have to be addressed. >> that could extend these things. >> they can. i think the market's reaction there is very important. the notion that markets would not react well to kicking the can down the road. i think it is more the market. the american public would not react well to just kicking the can down the road. >> bob zellick and austen goolsbee bought up the notion
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that this feels like groundhog's day. what is different post-election than pre-election? same players, slightly different complexion of players come inauguration day but not really. what has changed that gives the optimism that some deal will be struck now i could not have been struck before the election? >> first of all, the president was reelected. had he not been reelected, at the other side had taken power, he would have to wait for the new president. because you have the sitting president reelected, he did not have to wait. number two, we are days closer to all these things actually happening. the end of the tax cuts, the alternative minimum tax, the sequester, the automatic spending cuts. all those things are very close
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to being upon us. that does not deal with unemployment insurance and the payroll tax holiday. because those things are also set to end. so there is a growing momentum that i think will compel colleagues to act. could i be wrong? absolutely, i could. because there is rigidity in the system. especially on the far right and the far left. let's be candid. there is rigidities there. it is conceivable that you get into a negotiation and people just cannot adjust to this new
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reality quickly enough to make it time the decision. so you do go over the cliff. i hope that does not occur. but it is possible that you have to get into going over the cliff before people opposite to act. >> epicenter last i described -- a senator last night described the president as introverted. not particularly outgoing in bringing people into the tent. is there a deficit of schmooze velocity coming out of the oval office right now? >> i would say he is
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sufficiently extroverted to have just won a national elections. i think we have for presidents who have been reelected for a second term by these kinds of margins. reagan being one to read obama being one. so this notion he is introverted and not affected -- really? i would say he has been pretty effective. looking back, i do not know of people read ezra klein's column today about all the things that have happened. the money for the financial institutions being passed. really dramatic health care changes being made. these are real things that have
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happened. you may not agree with them but those are real accomplishments. one war ended, a nother one being put to a close. if you think about what he inherited, it was a remarkable set of circumstances. i'm not sure he had much time to choose members of -- as previous presidents have your years to it -- he was dealing with one crisis after another. i can just say for me, i have been at the white house more under this president and all the other presidents i have served with combined. he is a serious guy. i expect that you will see now that a lot of these other things are not in crisis mode that there will be more engagement with individuals on capitol hill.
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i think that would be a good thing. >> the you need at the moment like this an lbj type a personality? should we be able to rely on the vaster institutions we have here? should it require an activist president? they did not get to know each other. they are not out having dinner, smoking cigars. that is tougher now. shouldn't those institutions be able to solve those managerial problems? >> they should but it does make a difference. i just finished carrow's book on lbj. here is the president calling the government printing office to make sure they do not close
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so that congress can get a bill printed because he knew he needed to act because if he waited until the next day, some of the votes he had might drift away. can you imagine? a president, and the ever- present i served with, calling the government printing office to keep them open? i do think a dash of that would be very helpful in what we are involved with now. on this complex issues, just as important. if he spent hours and hours together -- if you spend hours and hours together, a certain decorum develops. it is important in getting an agreement. >> thank you. it will go to some questions from the audience.
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>> do you think it is necessary for the senate to pass the budget and if so, when and you think they will do that? >> there are different ways of passing a budget. there is a budget resolution. we have heard a lot of criticism, a budget resolution was not passed. instead of a budget resolution, a budget law was passed call the budget control act. the budget resolution never goes to the president for his signature. i think a lot of people in the country do not realize. it is purely a congressional
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document. in this circumstance, a budget resolution is not what we need. i think we need a budget law. a budget control act was a good beginning. set spending caps for ten years. it set ten years of caps and gave special powers to is special committee to deal with entitlements and revenue and said if you reach agreement, you will not face a filibuster. you will be able to offer that on the floor and get an up or down vote. that was a huge deal. they failed so the answer was the sequester. in this circumstance, i think we would be better to have a law rather than a budget resolution. >> another question? >> one last question. you are from north dakota. the bachmann oilfield is not
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changing the landscape of u.s. energy. that will change manufacturing costs during how long before that begins to pass through into the national budget as a revenue producer in a variety of different ways? >> if you permit me to go beyond that -- it is incredibly exciting. it is helped dramatically reduce our dependence on foreign oil. we have gone about 60% dependents down to 42%. in a report out yesterday said by 2013, the united states will be energy independent. that is a huge deal overtime -- a report said that by 2030, the united states will be energy independent. that is a huge deal over time. that will strengthen the economy. that will help create more jobs. that will improve our
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competitive position. that is going to have a budget in fact the most budgets are looking at a five-year window. very rare that we go beyond five years three the vast majority of time, it is a five- year window pretty do not get that much help in the first five. it has enormous implications when you go to the second years and third ten years. we are lucky to have it. >> on optimism, the results of that third question. that audience was pretty much split down the middle. i will ask robert thompson to come on for closing remarks.
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>> thank you very much. one of the few optimistic nights. i would like to thank our sponsors, without whom we would have been over it this booklet with this conference. i like to thank dorothy and her team for organizing the conference. i would like to thank ellen murray. she loves washington and conferences so much that he decided to stay in washington and london organization that is one continuous conference. in a week's time, he leaves the "wall street journal." mr. allen murray.
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[applause] and now outside, and other beverages and banter. thank you very much. >> coming up on c-span tonight, economists at the new america foundation discuss the potential impact of the fiscal cliff. in which automatic tax hikes and spending cuts would take place unless congress acts. then, henry kissinger. then, rob portman.
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>> this event is 90 minutes. >> good morning. i and the chair of economists for peace and security. i'd like to welcome you to this symposium.
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entitled "who's afraid of the fiscal cliff?" the eps is an organization of professional economists concerned with questions of military security, national security, economic security, social security, with the broad question that we have been grappling with intensely for the last four or five years. we are not an advocacy for lobbying groups. we gather together professionals working on this question to represent only themselves -- who represent only themselves and have the advantage of being able to speak to you with clarity and
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conviction. eps is also a membership organization. our web site is www.epsusa.org. i would invite all of you here and all who may be wanting to visit the web site. if you share the goals and objectives of the organization, join us or let us your support. we have the great advantage of privilege of having a very strong supporter and great friend in bernard schwartz, after whom this symposium is named. he planned to be here this morning, was not able to get here. but we at eps are tremendously appreciative, bernard, of your
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encouragement and your backing over quite a long time now of this symposium series. strict to essentials, the fiscal cliff is a device constructed in affect to force a rollback of social security, medicare, medicaid, among other programs. as the price of avoiding tax increases and disruptive cuts and the federal civilian programs and in the military. it was partly fortuitous, given the expiration dates of the tax cut, but also partly policy- making by hostage-taking, timed for this moment following the 2012 elections. a contrived crisis. the plain idea, which is now unfolding, was to force a stampede. in the nature of stampede, arguments become confused. panic tends to flow, fear compounded by doubt, especially when multiple, poorly
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understood forces, economic and political, all appear to be pushing the same way. our task today is to sort through those forces, and to ask whether any of them, taken singly or together, justified the forces of fear and doom that we are now hearing. i would like to break down this issue into four major questions. which frames the structure of the morning's discussion. first of this is, is there really a limit debt and deficit -- a looming debt and deficit crisis facing it government and the united states in such a fashion that urgent action involving major sacrifices is needed now? there is a broad belief that this is the case. what is the foundation of that belief? and is that foundation sound? or is it possible that other issues should be considered
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more compelling and should be brought to the fore in this next period of economic and political crisis? secondly, narrowing the question from a broader financial and this will position of the united states government, is there a crisis looming in the administration and financing of social security, medicare, medicaid, which demands reform of those programs? or is this a manifestation of a political agenda not justified by concrete economic facts? that is the subject of the third panel. third, with the military sequestration, built into the fiscal cliff, be the calamity
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that many have announced it to be? is it something that must be avoided by action within the next six weeks? that is the question which will be discussed in the second panel. i believe that panel will also take up the question of whether, given that you're 21 years after the end of the cold war and that we have learned hard lessons in iraq and afghanistan, whether this is an appropriate moment to began to reconsider just what our national security posture and force structure should be. speaking for myself, i can give you my short answer to the three questions. is there a looming fiscal crisis for the united states government? no. are there compelling separate reasons to oppose long term cutbacks on social security --
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to impost long-term cutbacks on social security, specifically on medicare and medicaid? no. do we face a disaster if we fail to act in the next six weeks but instead deferred decisions on all of these matters until the early part of next year? no. those are my short answers. my professional as well as personal message is -- don't panic. this is not a moment of high drama. it is a moment for no drama. the american people have expressed their confidence in the president against a very clear alternative who promised higher rates of economic growth, and return to past prosperity at the price of an following very severe cutbacks in public functions and social insurance. the people expressed their disbelief in that formula. they did so very wisely. they also remove the argument, which i think was widely expected to hold, that we must act now because political conditions will be worse in january. and that this represents a kind
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of last chance to get our house in order before entirely different political forces take control.
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not going to be true. the public in short that it will not be true -- ensured that it will not be true. political conditions will be quite different in january from what was expected. there is in any event at this moment space to think and consider what we should be doing, what our national priorities are, what economics tells about the balance of risks that the face. we should use the space.
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i suggest this morning's symposium is designed in that spirit and i am very happy to be introducing it and to turn the podium over to stan who will moderate the first panel on the question of the fiscal cliff. >> thank you. i appreciate you turn the podium over to me but i will sit here. we will all be sitting here. as it were to the cameras following us. good morning. thank you. i often wonder what was going
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through ben bernanke's mind when he used the word fiscal cliff for the first time or when they decided they could not sit with a really wanted to say. which is that the combination of tax increases and spending cuts that will go into effect will cut the deficit too far too fast and therefore what he was saying -- the other elements that contribute to gdp growth were not able to absorb it. so what bernanke was really saying is he recommends the deficit be higher than it will otherwise be under current law. anyone who thinks that in february -- [indiscernible] he wants this back? is that what you're saying? excuse me while we work it out. back in february and probably still today, someone recommending the deficit be higher than it would be under
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current law would have samples i painted on a forehead and a bit brighter and bigger. and become more of a political target. all the discussion about the fiscal cliff so far and those recommending it be avoided, prevented, whatever, do not use the phrase and we think the deficit should be higher. even though that is the inevitable conclusion. mathematically, that is what has to be happen. about the letter put in the news ticker to the 15 ceos from financial-services companies. in the six paragraphs, the
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image of fiscal cliff seven times. never used the word deficit once. two weeks later, there was a letter from various other sectors saying it never mentioned the deficit once. it is an interesting communications challenge. how do you say you do not want the fiscal cliff to happen but you what spending to be higher and revenues to be lower and therefore the deficit to be greater than it would otherwise be? that is one of several things we will be discussing in the panel. i will oppose some rules. we will give five minutes or so, we think are the key elements of the fiscal cliff. i'd like you to interrupt us as we go along pretty will take questions at the end but it will make it more interesting and substantive for everybody if you just challenge us and ask for more information, ask us to repeat something as we are going along. you have a question already? okay. all we ask that you get to a microphone to do it.
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we are recording and that is the one thing you need to keep in mind. with that in mind, let me quickly introduce the panel. jamie you know. i will not introduce him anymore. stephanie kelton is the head of the economics department at the university of missouri kansas city. bruce bartlett is someone i have known forever. he is now one of the foremost authorities, and has been for some time, on tax policy, tax reform. you can see his writing in "the
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new york times." he has a great economic blog. he would be shooting me if i did not mention the book. he has several. the latest is "the benefits and the burden." it is a history and review of tax reform issues. i get my tongue% now, right? and then we have the chief economist of the center for budget and policy priorities, which is where budget analysts go to talk to budget analysts. stephanie, i am going to start with you. there is a basic question. did you see the look of shock on her face? the basic question to start with. jamie said we should not panic, but you cannot turn on cnbc or bloomberg and not talk to people about to panic, if they are not already. is there a reason we should be concerned about the fiscal cliff beck's is the damage that
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great that this is something that has to be prevented under any circumstances? please use the microphone. >> i agree with jamie. >> ok. we can move on. [laughter] >> the clear and present danger is not why the deficit or the debt it -- is not the deficit or the debt, or the so-called fiscal cliff. the danger is we still have a very weak economy. we are looking at, as you said, an environment in which people are in panic mode over the fiscal cliff. i think there is a lot of support, actually, because the population does not seem to understand what the fiscal cliff is and what it means. what they are hearing on television is a lot of hype about what will happen if the fiscal cliff is not avoided. that is actually generating quite a bit of support for both sides to come together. it seems adult. it seems like the right thing to do. put your partisan differences aside for the country, and find some way to avoid the cliff. what that means in practice is striking some kind of deal, what we have heard of, as a
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grand bargain. it is important to keep in mind that the grand bargain itself, is really a form of austerity. this is an austerity plan. when you have an economy that is still struggling to find its feet, and you are talking about imposing austerity, i think we have seen pretty clearly, watching europe over the last 3.5 years -- that is not a good idea. we definitely have time to start -- to stop and get this right, before we follow greece. >> the congressional budget office says that gdp will fall but -- by 2.9% if the fiscal quick hits. i do not think that happens on january 1. is that correct? >> the full effect certainly would not happen. these are estimates about what might happen during the fiscal year. sometime between january and september 30, he would see a
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fairly sharp increase in unemployment, and gdp growth turned negative return-, a return to recession. >> but on jim number one -- -- on january 1 -- you have talked about this as a fiscal slope, not a fiscal cliff. >> correct. these tax increases do not go into place all at once. you do not have a billion dollars on day one. the cuts are the same way. spending cuts are phased in over time. this would work its way out over many months to be something
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that could be devastating for the economy. in a matter of days or weeks, you would not get that outcome. >> i just mentioned a report. the center's report, which came out in october -- >>, it actually came out -- the first version came out almost six months ago. i finished the draft of the night before going in for achilles' tendon surgery. that was six months ago. we updated in november. we were concerned that people would panic and strike a bad budget deal, and wanted to emphasize that it was not -- but it was not a wily coyote moment. it was a slow, not a fiscal cliff. -- a slope, not a fiscal cliff. >> what actually happens on january 1, in terms of economic impact? >> tax rates go up. that means that people -- tax rates go up. unemployment insurance, the additional federal unemployment insurance expires. the temporary payroll tax cut expires. longtime unemployed workers who lose an average of $300 a week. people see a reduction in their
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take-home pay. it is a weekly amount or a bi weekly amount or a monthly amount. you do not all of a sudden get a bill for the whole thing. over time, it starts to build up. the alternative minimum tax kicks in and for high income people. that does not happen until they actually file their returns in april. things start slowly. there is plenty of time to work out a smart response. >> bruce, on the tax side, can any of this be fixed retroactively? >> all of it. there is no constraint. that is one reason why i am optimistic about this situation. for at least four years now,
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hit the main barrier to doing any kind of sensible economic policy, especially related to dealing with the debt or the deficit, has been not one of our parties is nuts. the republican party, they are completely out of their minds. their attitude is -- and they have torpedoed every effort to do anything meaningful about the deficit or the debt because of one reason. they adamantly refused to raise taxes by so much as a penny. this is what created the crisis we are now facing. remember that the crisis all began because the republicans refused to allow the debt limit to increase. they were prepared to default on the debt, they are so obsessed with their ideologies.
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finally, there were brought to the bargaining table, and they agreed to this sequester mechanism. they agreed to $600 billion in cuts in defense and $600 billion in domestic programs. every single republican thought this would not happen. they were going to create the super committee. remember that? they would come up with something better. everybody agreed that was smart. but the committee went down the drain, because the republicans would not accept a single penny of tax increases. this may be a justifiable position, if taxes were extraordinarily high. in fact, taxes have been extraordinarily low for quite a long time. the postwar average is 18.5% of gdp, federal revenues. right now, they are 15.8%, and have been considerably below that the last several years.
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if there was any truth to the republican obsession with the idea that low taxes stimulate growth, the economy would be booming. they have no credibility. they lie about everything. for some reason, serious people in the country take them seriously. obama does not take them over his lap and spank them as they deserve. he treats them with undue respect. that has all changed now. the tax increase is going to take place anyway. the republicans can only stop it by taking some positive action to extend these tax cuts that they are so obsessed with. by the way, republicans do not think there is any problem with any level of spending cuts. only the tiniest tax increases would devastate the economy, contrary to everything the congressional budget office has said, which is exactly the reverse. taxes will rise automatically if they do not do anything. they thought they were so clever two years ago. they sat on their hands and did not do anything. finally, at the last minute,
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predictably, barack obama caved, and said we would expand everything for two years, and take out everything he demanded as a requirement. he totally caves to them. they congratulated themselves and patted themselves on the back. now, things are different. we have had an election. it is clear the american people have repudiated the republican ideology. 60% of people support higher taxes to reduce the deficit. if they are holding a losing hand. what i said this morning is, all obama has to do is have the courage to wait. let us wait until the taxes have actually gone up. then, anything that fixes the
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problem is a tax cut. you see it? relative to the situation that will exist on january 2. all of a sudden, the political dynamics change. he has the power. all he has to do is sit there and say, "this is what i will accept. anything you send to me that i do not want, i will veto, and
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>> do you think the comments by the senatorial candidates todd akin and richard mourdock matter? >> hard to measure but obviously the gender gap we have on our side which persists, the
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final numbers are not in yet but it probably will be comparable to 2008. it is a challenge reface as republicans. i think those comments exacerbated that gender gap. >> that is extraordinary when you think about it. in previous cycles come, and by senator like that would not have echoed. >> whatever stupid things i say today can have an impact on what happens. every gathering, every fund- raiser, and everything is now subject to being repeated on the web a controversial comments spread like wildfire. in 2014 where republican have another opportunity on the senate side -- there are 20 democrats upper reelection and 10 republicans, we have another
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opportunity based on the numbers to obtain a majority to be allowed to pass budgets and get tax reform don and taught -- in the reform. -- an entitlement reform. these comments can determine not just their alexian but affect the national scene. -- just their election but affect the national scene. i'm more focused on the policy side. i really think our country is in trouble. there are a lot of small people -- more people in this room closer to -- the focus now has to be dealing with the fiscal cliff and putting a competitive agenda in place for our country.
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if we do not do that, i believe the one not able to get the kind of economic recovery we all hope for. >> i want to get to the agenda but i want to just one more question about the campaign and the republican coalition. that is young people. a lot of discussion in the press in the last week or so that you did not make as many inroads among is under 29, despite the fact that a lot of them are in living at home and there's not a great job market for them. the president still won about 60% of that vote. is is partly a cultural messes. is a marriage -- gay marriage one of those thresholds issues that make the republican party look out of touch with those voters and to have to change that, the way republicans talk about the issue? >> yeah.
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[laughter] >> that is a big concession to read a lot of your colleagues would disagree with that -- big concession. a lot of your colleagues would disagree with that. >> every time an election is one our loss, it is , oh my gosh, it's the and of the democratic party or republican party. it can explain the results in a high of florida and perhaps virginia. it was a close election but the reality as the party that gets less than 8% of the african- american vote in less than 40% of the vote of those coming up to the system is a party that needs to adjust. i talked about that today, some of its policy and tone is a more
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inclusive message tigran out how to take our positions on economy, growth, and opportunity. and translating that into a way young people understand and appreciate. you get out of school and look at a 50% unemployment rate. you would think that would be big issue in the deficit to read is now $55,000 for every young person getting out of college. those issues are ones you are not able to communicate in a way that was effective clearly to the majority vote and some of these social issues are also very important. they look at these issues differently than our generation. >> it is a different attitude now reacted laws that and deal with it. >> does the president have a mandate to raise taxes? your minority leader in the senate will my colleague last
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week that he does not believe that is his mandate. >> as you know, i am a fierce advocate for tax reform for all the reasons we talked about earlier with competitiveness. america is falling behind in terms of our competitive decisions and our tax system is antiquated. their ways to fix it. every country in the world have transformed from reform, lower the rates. we have not touched it since ronald reagan really . in 1986. we have not done anything to touch our rate in reform our code. this flow of capital, and best of, people, will follow country
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to have a more competitive environment. we have to reform the tax code. when you do that, you will get more revenue. it is guaranteed. there are some opportunities here. this is an opportunity for us as a country. if you look at the joint tax committee analysis of what tax reform could mean in terms of macroeconomics impacting growth, all will lead to more growth. >> if the president insists and says this was fought over it the to the campaign and we fought over rising tax rates, jay carney said the president would veto any bill that extends the current tax rates. so if he insists tax rates go up for those making over $250,000, what would your recommendation be to the republican conference in the senate? >> i believe it president does
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have a veto over the press secretary. thank goodness. i let the president's comments better than jay carney's -- i like the president's comments better than jay carney's. i would be very concerned about that. i am a huge advocate of tax reform. what does that mean? that does mean that a lawyer laurates, you do things in terms of the preferences in the code and this is deductions and credits and exceptions. it allocates resources more efficiently. economists, right, left, center, would agree the current code is inefficient. it is a great opportunity for
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us. that is where we ought to be headed. for us as a beard addict is correct code -- for us to say we are going to take this current told about more taxes on top of it -- and my going to make that investment, take the risks or am i going to pay more to uncle sam. that does have his company's work. it makes no sense. i hope the president will see the congressional budget office analysis of the past week which talks about this into a $4 million predicted of 4 million jobs -- 3.4 million jobs.
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why would we want to do that? >> white house economist to napoli tax rates matter in the way you just said. >> they clearly matter. there is an honest debate about how much a matter compared to other things but if your goal is deficit-reduction, which i love, i think it is important but if you believe that that's and that what this tax increase would do to the economy versus its impact on the deficit, it is hard to argue. it makes sense economically. i am not saying we will not end up with this discussion and debate and who knows at the end of the year what happens. but i am hopeful we will look as honestly and say if you raise taxes on these small countries -- small business of the norse, it is less than 10% of our deficit. so when you hear people talk about it, keep in mind.
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the different but in the surpluses and deficits we ended up with all the last decade -- 4%. that's the cbo number, not mine. even if the system there is no economic growth as a ship with that -- if you assume there is no economic growth with that. let's make a commitment now. we will put the car plant in place for six months. at that time, we will have tax reform and entitlement reform to do with these big issues we have to deal with. in the meantime, let's make a downpayment. is to be spending cuts that deal with the sequester, at least for the six months preiod, which is not easy to do.
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that would be in the neighborhood for about a year for six months. let's make that downpayment now very have a six month period for congress does its work. with the tax reform the pri much everyone agrees to in general -- that pretty much everyone agrees to in general. let's put congress on the spot. someone said that is kicking the can in the road. i think congress can do it if they really put their mind to it. it was and is to be brought into the spirit iron man.
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on the super committee, each of us had a super hero attach to us. iron and that kind of rusty in that process. it was disappointing. but the malady as the president did not weigh in. -- did not weigh in. >> let's open it up. any questions? >> [inaudible] >> in terms of economics. >> particularly in difficult times.
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>> are you liberal, a moderate, or a conservative. most americans are moderates and conservatives by far. the number of liberals, i do not know what the last numbers were. no higher than it was the previous time the question was asked. people to not consider themselves to be liberal, they considered themselves to be moderate or conservative. so many people now want to be dependent on government rather than the private sector to create opportunity, it is not true. yes, when people are having hard times they would like to have some help with what a hand up not a handout. that is still very much american ethic.
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my state is still a center-right state. if you ask to what they think. we were not successful this last go around. the policies that mitt romney was playing out for precisely that. not a radical departure. that had made as uniquely capable of creating opportunity and wealth in the largest middle-class the world's ever known private-sector job growth and rely on government. not to create jobs but craig the environment for success. that is where we were not able to translate that.
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>> yes, sir. >> i would like you to come back to me on -- i agree. i think we are center-right country. i do not think the perception is out there that the republican party is a center-right party. the perception is much further right. the far right that tends to scare people more. milliken to the on how to vote bank because of that perception. >> i agree.
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i think your doctors are probably that demographic. -- daughters are probably that demographic. i think you're right. that is a perception of -- for such a lot of people have. -- a lot of people have. for your daughters, social media is so much more important to them. it is not just this new technology we talked about. it is how the reach people with a live? which for a lot a young people, they are online. idea.boadebroader the other side was effective in
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taking the comment that the missouri. >> yes, sir. >> senator, it seems to me the policies yet in the fight as may be needing change might have been the policies that were adopted as a necessity to get to the primaries. how do think the primary system can change to allow a candidate to come to that might represent the center right as opposed to the far right. how cannot be adjusted? >> and the democratic and republican side, there is a lot of talk about that. and to you go to a national primary -- until you go to a
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national primary, which no one is talking about, you will have this issue. there were some iowa republicans recently meeting same they had to be careful. we need to be careful. primaries are going to continue and be good to that process this go round. the president had no primary opponent and he was free to have a rose garden shed jeff burris. we cannot have that luxury. we have to go to this process.
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the recall deny primary, herman cain was going to be our candidate. newt gingrich was going to be our candidate. rick santorum was thought to be our candidate i did not want to leave out michele bachmann terry but it was up and down. we go state-by-state in have to fight for it. there is some benefit for that. it forces you to do that. in national primary, he would not have that opportunity. there are some good and bad parts of it but yeah, it does chris and challenges. >> the super pacs on the
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republican side probably spent over $700 million. it looks like they achieved almost nothing. in terms of electing candidates they targeted. what does it say about anything? >> he bowed and editorial about it. he is way too important, rupert, to write his own editorials and margaret [laughter] [laughter] there's a lot of discussion now about --
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just for you to understand, the context of this question, it is not the other side without spending a loss too. is that accurate? >> the unions may better advantage of a lot of the super pac money, channeling it into other things. the other issue was obama's advertising. and they made which nobody responded to it. >> it probably did it a difference because
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>> in the end, mitt romney loss but it does not mean it did not make a difference. many cannot afford a petition campaign and someone else helping in, sometimes they ads are less helpful. some of the market, some of them or not. some of them were off message. with your business and marketing efforts. if you have to of a marketing team within your business but also an outside marketing team, how would you feel about your results? probably not very good. you want to target it and develop your message appropriately. i am not saying it was not without some impact. i think it had a lot of impact. but it would have been much more
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impact so if it were run through the campaign. >> i am being told that is the end of the session. we are going to have dessert and coffee downstairs where we have been having the meetings right outside the general session and the public again at 2:30. i want to thank senator portman for coming. great to have you here. >> the wall street journal ceo council hosts its annual meeting this week in washington. next, three panels from that of that. first, house budget committee ranking member talks about the plan he endorses for dealing with the federal deficit. then tim geithner talks about
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the so-called fiscal cliff and the potential for tax hikes and spending cuts. lullaby kent conrad today nancy pelosi announces her future plans live with a press conference at 10:00 a.m. eastern on our companion network, c- span2. ceo wall street journal's council hosts its annual meeting this week in washington. a discussion of the so-called fiscal cliff in which automatic tax hikes would take place unless congress acts. ranking member chris van hollen and as it does a pact modeled after the simpson bowles plan. this is 30 minutes. >> thank you. it is great to have you here.
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we have had people for the last 24 hours giving their opinions on the fiscal cliff and the fiscal cliff negotiations and what should happen. we are expecting you now to tell us exactly what is happening. >> listen, i think we all need to accomplish two things as we approach the fiscal cliff. one, do everything we can to avoid it both in terms of the sequester peace and also the tax peace. then create a structure where we can deal with the big issues, the big fiscal challenges over the next six to nine months. it will be very useful if we can least agree to a framework structure. one is to make sure we can accelerate in what has been a slow recovery.
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at the same time, act now to put our long term deficit on a sustainable downward path. act now on both. by now i mean first avoid the fiscal cliff, and then get into the next six-nine months in a structured way. >> several people have pointed out the democrats have the advantage in the fiscal cliff. is there any possibility you would go over in order to force action if necessary? >> there is no desire to go over the fiscal clef. >> is there a possibility what? >> there is a risk we would go over the fiscal cliff. two parts, as you now -- one is the sequester piece. i believe there is a very decent chance we can resolve that piece. because there is universal agreement there is a bad idea to have these across the board, indiscriminate cuts. look at the amount of deficit savings over a year, you talk about $110 billion, $55 billion defense, $55 billion in non- defense. it seems to come up with an
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alternative way to achieve that in the budget window. that is one piece. the tax piece gets tougher. we also have the objective of beginning to reduce the deficit in a balanced way. i happen to support the framework of simpson-bowles in terms of their revenues and cut and the ratio of revenues to cuts. if you look at the simpson- bowles framework, their starting point presumes the amount of revenue you would achieve if you allowed the top rate to go back to 39%, the clinton era levels. that is in their base line. then they raise revenue on top of that. as we approach this challenge, which is the long-term deficit reduction plan, my view is we should make sure we get that kind of mix of both cuts and revenue. i'm open to look at all different ways of getting there, but it's hard to achieve that result if you box yourself in.
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>> what you have heard over the last few days from republicans is a willingness to that tax rates for high income people rise, but to do it with deductions. i saw you quoted in some paper i cannot remember the name of right now this morning saying he won both. you have a republican movement on the tax issue, but do you really have to get both deductions for high-income people and rates for high-income people? >> what we need ultimately is a mix of revenues and cut the you see in simpson-bowles. we should look at tax reform. the issue is how you do tax reform in a way that eliminates preferences and other things that we could prune out of the tax code, but also accomplishes the other objective in simpson- bowles, to achieve deficit reduction in a balanced way. if someone has another idea of
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how to achieve the total amount of revenue in simpson-bowles that they presume, i think they have a great framework, but if you look at the deficit targets they hit, which we thought was a good aggressive target, $1 trillion over 10 years, if you look at the debt to gdp ratio and a look at where they got the deficit on an annual basis relative to gdp, in getting their they assume this additional revenue we are talking about. it seems to me we should get our heads together and figure out how we get the revenue that is projected to come in through simpson-bowles, the whole plan, as well as the cuts. >> let's stick with the tax piece, even though that is your peace. the budget committee does not get to do taxes, even though you will have a piece in the negotiations.
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in your view, is there a way to get the $1 trillion of deficit reduction that you need from revenues and still bring down tax rates? >> and still pay to bring down tax rates? that is the question. i am saying, let's do the math. look, i thought the tone of speaker boehner's remarks was very good.
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>> is not fixable? >> not according to the congressional budget office. they concluded that if you simply provide a voucher to go out into the health-care system, as you know, in the private health care system costs have been rising at at least the same rate as in the medicare system. in fact, medicaid obviously has serious problems. medicaid costs are much lower rate -- medicare has risen as by the lower rates on a per-capita basis.
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the private health insurance markets -- simply transferring somebody out of medicare into the private health insurance market will save medicare money but it will save medicare money by requiring premiums to go up dramatically on these individuals whose median income is $23,000 right now. >> that hopefully will get some of you -- you have a number of health insurance company executives who may be able to weigh in on that. a couple things that have been suggested -- raising the retirement age, does not make any sense today to have the retirement age be the same or slightly higher than it was seven decades ago. >> social security, number one thing, we should create process like with ronald reagan. i think we should look at early retirement age and social security, which is currently 62, and look at ways to great incentives for people to work longer.
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create incentives for people to work longer. the retirement -- that has the joint beneficial effect of reducing social security costs, but also keeping people working longer, providing for their families and generating more income for the economy and for the treasury. i think there are other things you can do, but look, i am open to a conversation about this. when it comes to things like social security, again, you have got to take a mixed approach. look at simpson-bowles or others, they have a combination of revenue and spending reform. >> you are willing to at least look at that? >> i am willing to consider them as part of a possible plan, but i do not think we should jump to solutions, especially in medicare, that's simply transfer cost.
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in social security there are other ideas, some of which we discussed in the super committee. >> social security has to be a part of this? >> i think we should look at social security as -- that is what simpson-bowles did. they said, look at social security, but not as part of our deficit reduction target. there is room for a conversation there -- what others have said is they do not want that to be part of how you calculate your deficit. >> what do you have to do? you talk about a process that lasted over six months, maybe a little longer. what do you have to do in the next few weeks to give people the confidence and this congress the credibility it needs? >> two things. with respect to the sequester, you have to come up with at least an alternative mechanism do generate $110 billion in deficit savings.
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so you do not do this across the board meat ax approach. put together a proposal that combines getting rid of direct payments, some of the bigger agriculture subsidies, a proposal would eliminate some of the tax breaks for oil companies. >> why not just do that? >> you have to talk to our republican colleagues about what you just cannot do that. we did not even get that to a vote. my point is, there are a number of ways you can achieve $110 billion. and prevent the sequestered. that is only for one year. then you have to do a agreement on the tax piece and create a very clear structure and timeline we get the so-called grand bargain done over a six- nine month period of time. you'll have to do some expedited procedures.
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a lot of thought on how you create a situation that forces action. the sequester here, for all its problems -- it is hopefully going to result in at an action- forcing event. there are risks, but also potential benefits. >> what does the president need to do to get this deal done? there have been stories in the last 40 hours to talk about how he is going after the people to take his case, little thought is what the election was about. is that helpful to the process, or is there more of an inside game he needs to play to keep what happened a year ago from happening again? >> i think it is both. it is clearly he has to reach out to congressional leaders in both parties.
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he has already reached out -- i am sure they will build on that. continuing the conversation with the public is important. you had some conversation here about interpreting election results. one of the things not talked about in this election -- what we will do with respect to resolving tax policy issues, at least some of them, was discussed in virtually every debate, something that was front and center. >> is that a mandate? >> i think the public has spoken on that, but that does not mean the president is not willing to reach out for the people. i do not think he is going to say, on all these issues, a whole range of different issues, there is a mandate.
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there are certain issues like immigration reform where clearly they were at the center of the campaign. the president is on very firm ground saying we have heard from people on this. that does not mean he is going to -- he is not willing to listen. he is. >> in the house, your leadership -- nancy pelosi stepping down? >> i do not know. >> you do not know? >> i do not want to speculate. my guess is we will find out fairly soon. i think she has done -- my view is she has done a good job. was very willing, as you probably read in books written about this, to support a budget agreement that must come out of the discussions between speaker boehner and the president. >> if she does step down, would you be interested in the job? >> i am not getting ahead in anything. if i was betting, i bet she is going to stay.
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>> you bet she would stay? >> this is all speculation. >> last question before i open it up -- a lot of people have comments or questions for you. we also have a couple people who will be at the white house tomorrow. a group of ceo's meeting with the president. what can this group do to be constructive, to help get this discussion where it needs to go? what should they do and what should they not do? >> is an important initiative -- i just heard the ad on my way over here. the message is beginning to get out on the airwaves. i think it is really important to keep the dual focus, meaning, i guess we need to come up with a credible long-term deficit reduction plan, but let's not do anything that compromises our efforts to accelerate the economic recovery.
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for example, i have proposed extending for at least one year the payroll tax cut. or its equivalent. you could structure in a different way. the congressional budget office came out a few weeks ago with analysis that showed overwhelmingly in terms of its impact on jobs and the economy that the one-year extension of the apparel tax cut gives you much more jobs and economic bank for your buck than keeping the top rate at 35%. it is not even close. you are putting more money into the pockets of 160 million working americans were stretched right now. they will go out and spend that money and goods and services in their community. it has a much bigger multiplier effect. i do wonder about some of these arguments that you have got to
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keep the rate at 35% because of the fragile economy and jobs. not, at least so far, silence the opposition to extending the payroll -- it does a lot more for the economy. >> part of the argument is small businesses. >> i have also seen -- we can go through all the stories. they talked about the hamilton projects -- people who have looked at these defects for a long time and relatively small changes in the top marginal tax rate, according to the studies, and according to the crs, are not the driving factor in these economic -- >> the payroll tax would be much more powerful? >> no doubt that right now with a soft economy that has a bigger economic boost. >> we have a couple of questions. >> the first, the simplest and this powerful idea i heard during the failed 2011 grand bargain was to raise the eligibility age about 65. should this be on the table?
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>> it should be part of the conversation. one very practical complicating point on this, that goes to the supreme court decision on the affordable care act. one of the wrinkles, more than a recall, one of the provisions decided was that people on medicaid, the initialed people who came into the affordable care act and medicaid did not have to be covered by states to chose to opt out. frankly, that creates a problem because the affordable care act would have otherwise provided day potentially feasible option for people between 65 and 67 who are not knocked out. now you have people at relatively low in comes at the age of 60 -- even if you took the retirement age up.
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at 66 years old, somebody busting their back as a construction worker retires -- where will they get their health insurance if they are between 65 and 67 and cannot go on the exchange? having to live in a state that says they will not participate because -- medicaid, nine governors have said. these are practical concerns. >> do your legal experts say there is some way to fix that? >> you would have to find a way. you could do it legislatively, but you'd have to have agreement to do it. these are sort of practical issues that we need to deal with as part of that. the affordable care act did change the discussion with respect to the medicare age, but then you have this pretty sizable potential hole. >> one more -- these are ceo's, they are used to giving performance reviews.
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why do all of you not talk to each other and discover what each of you means by the statements you are making? actively pursue a solution and not just debate this -- would you agree that is not at this time -- is important at this time to do a right rather than determine who is right. >> we are excluding this forum from that comment. look -- there is no doubt we are not going to get there if we are not talking to each other. i just saw rob portman. i am not betraying any confidence is to say he and i already exchanged a conversation. we served together on the so- called super committee. my view is that those conversations are very important. they began -- at the end of the day, those conversations will be important in forming the negotiations that ultimately take place between the leadership in the house and, of course, in the senate and the white house. i think every member can contribute to that conversation
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and they should be having direct conversations. i have already reached out to some of our republican colleagues to do exactly that. put more ideas on the table. >> we started with a group of senators and ex centers who all opined it was the ability of people from good will of both parties to come to gather and do what you and senator portman did has gotten worse than it has ever been. do you agree with that? you have been in congress for a long time. >> i was elected in 2002. no doubt that -- it was not as if it was all kumbayaa at that time either. but it has gotten worse. not so much in terms of the personal relationships.
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i think there are still very strong personal relationships. it has gotten worse in the ability to compromise. i would say people should read the book -- you know these gentlemen well. one is from the american enterprise institute, the other from the brookings institute, they wrote a book called "worse than you thought." it is hard. when you get into this discussion, everybody says, there we go again. just read the book. these are two scholars of the congress who have always been suspected -- respected as people who call the shots. look at the indiana republican senate race. dick lugar is a conservative republican with a high conservative rating. i have great respect for him. he was beaten by somebody who ran too far from his right -- to his right, who said his definition of compromise is when democrats agree with republicans. if compromise is a dirty word, we are in a big world of hurt. to follow other conversation, in addition to fixing the debt, i would encourage everybody to do what you do every day in your jobs, which is try to reach a
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fair principled compromise. it has got to go beyond common ground. we use the word common ground a lot. look at the last election, there is not a lot of common ground in terms of overlap in approach. it has to be compromise, which means accepting some things you do not like on both sides and getting some things you do like as part of meeting in the middle. that is compromise. common ground -- we can work through the budget. certainly there are some areas of overlap, but it does not begin to get you to the kind of deficit reduction numbers we need to get to. you can only do that through compromise. i want to circle back to the jobs piece. you can only do that with compromise. it has been an interesting
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conversation on sequestration. the first time i saw some ads run about how cuts in defense would lead to all these job losses, 100,000 jobs lost in the state of virginia. what happened to the argument that cutting spending right away was the way to prosperity, which we heard from our colleagues for 67 months? why is it that building a tank creates jobs by building new roads and bridges and transit does not? of course it does. we need to dispense with this idea that just cutting somehow leads to prosperity. it does not. but we do need to cut in a measured, stable, credible way, during a period of time, to get deficit down. we need to focus on mandatory spending areas coupled with revenues. that is why simpson-bowles as a framework provides the right direction. >> other questions?
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>> obama rejected simpson- bowles. why are you considering it? >> this is both a strength and a weakness for simpson-bowles. simpson-bowles provides great architecture. it does not flesh out every detail. nobody has taken simpson-bowles and converted that from a well thought out blueprint into legislation because there are lots of various ambiguities. the overall architecture of simpson-bowles says we should achieve deficit reduction through combination of cuts and revenue. it seems to me we could take that as the starting point. that is how we had deficit numbers. my view is we take the ratios, simpson-bowles, and move forward. if we disagree, we have an obligation to come up with
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something else. the president's budget is actually much more closely aligned with the framework of simpson-bowles than the other budget we have seen coming out of the house, for example. partly by virtue of the fact he has revenue in addition to cats. the president's budget has some significant cuts in mandatory spending programs, whether in the agricultural area, also some in the health-care area. if you look at his aggregate number of mandatory health spending, it is not far from simpson-bowles. so i think that that is the right framework. i think if you look at comparative plans, the president is closer to it. as you know, house republicans rejected it wholesale, the simpson-bowles plan.
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>> final question? >> from an overall comment, it is frustrating. we have heard a couple panels where it is almost like national geographic. we get to watch another organization, how it works, everybody talks to each other but nothing gets done. i wonder -- in a company you basically get to call a meeting, lots of people disagree. we had to cut and grow at the same time. who is the single person who can get everybody in a room to get them to move things to the next level? i was at a bunch of conferences this summer and last summer. simpson-bowles came up and we're still talking about the exact things that nobody has taken any action. who is the single person who can get everyone in the room and say this is the next step we need to take?
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>> you are right. is a messy process. the democratic process is a messy process. i have worked with law firms and lots of clients who could not make a decision and said, we will implement this now. there is no one person in our system, especially in a divided government, who can do that. the president is going to take a lead. and the president is calling members of congress to the white house, but the other question is who can get them all to agree? agreement in our system requires a willingness to compromise, and requires an ability to get the votes, ultimately, in both houses of congress. in order to get the votes, you need to be able to persuade members of your caucus. i think that, look, the fiscal cliff creates risks, but it also creates opportunities.
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the only other system that would allow you to both have an election and implement your ideas would be to move to a parliamentary system where the prime minister's party by definition has the majority and can implement something. we have a system that is very different. the checks and balances often need a lot more checks in the system, but -- i know you are frustrated. i understand people are frustrated. all i ask people to do is to study the facts and come up with what they think is a reasonable compromise. it is easy -- everybody has their own perception of what to compromise. that is why it is nice to get an outside view. you have simpson-bowles. you have two groups of bipartisans who put together a model. they have a lot more revenue, frankly, than simpson-bowles.
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everybody should know -- simpson-bowles also cut defense more than anyone is willing to talk about. this across-the-board sequester is a bad idea, whether it's defense spending or other areas, but if we are going to talk about these seriously, we have got to really delve into the ideas bipartisan groups have put out there. >> chris van hollen, thank you very much. >> thank you. >> live coverage from the east room of the white house at 1:30 eastern on c-span2. treasury secretary 10 geithner backed up president obama's plan to veto any bills that extend to veto any bills that extend the bush era

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